You receive "free" money if your contributions
are matched by your employer

You decide how much to save (within federal
limits) and how to invest your 401(k) money

Your regular 401(k) contributions are made with pretax
dollars

Earnings accrue tax deferred until you start
making withdrawals, usually after retirement

Your Roth 401(k) contributions (if your plan allows them) are made with after-tax dollars; there's no upfront tax benefit, but distributions of your contributions are always tax free and, if you satisfy a five-year waiting period, distributions of earnings after age 59½, or upon your disability or death, are also tax free

You may qualify for a partial income tax
credit

Plan loans may be available to you

Hardship withdrawals may be available to you, though income
tax and perhaps an early withdrawal penalty will
apply, and you may be suspended from
participating for up to six months

Your employer may provide full-service
investment management

Savings in a 401(k) are exempt from creditor
claims in bankruptcy (but not from IRS claims)

A 401(k) plan
is a type of employer - sponsored retirement plan in
which you can elect to defer receipt of some of
your wages until retirement. If you make pre-tax contributions, your taxable income is
reduced by the amount that you contribute to the
plan each year, up to certain limits. The
contributed amount and any investment earnings are
taxed to you when withdrawn or distributed. If your plan allows after-tax Roth contributions, there's no immediate tax benefit, but qualified distributions are entirely tax free.

Most 401(k) plans offer an assortment of
investment options, ranging from conservative to aggressive.

Bear in
mind...

401(k)s do not promise future benefits; if your
plan investments perform badly, you could suffer a
financial loss

If you withdraw the funds prior to age
59½ (age 55 in certain circumstances) you may have to pay a 10 percent early
withdrawal penalty (in addition to ordinary income
tax)

The IRS limits the amount of money you can
contribute to your 401(k)

Unless the plan is a SIMPLE 401(k) plan, a safe harbor 401(k) plan, or the plan contains a qualified automatic contribution arrangement, you may
have to work for your employer up to six years to
fully own employer matching contributions